Edinburgh Investment Trust

[Hariseldon58]

This trust has had so so performance of recent years. Managed by Mark Barnett, previously Neil Woodford...

Mr Barnett has recently been saying all is good and he is not Woodford, I wonder if anyone has any views or insight on this trust. ( The discount is a little under 10%, fairly typical for its sector)

Moderator Message:
Moved from REITs to here. - Chris

[Dod101]

I have held it for many years and as I could not get along to the AGM this year, I wrote to the Chairman, suggesting that they might like to consider changing manager or at the very least consider a change in their dividend policy. It could be argued that the manager is constrained by managing a UK income trust. Anyone who has tried to derive an income form UK shares in the last few years is well aware of the problems (such as a typical HYPer) I suggested that they might consider being prepared to pay at least part of their dividend from capital and that would free the Manager to invest in a wider variety of shares so as to have better chance of some capital gains as well as generating an income. The Chairman was quite forthcoming in his response and tells me that Mark Barnett, the manager, is very valuation driven and has continued 'buying into UK domestic companies rather than into the much higher valued consumer brands and international growth stories. This 'sticking to his knitting' has been a significant contributor to his underperformance'.

They also called in Willis Towers Watson to give an independent view on the Manager's performance and in the end the Board decided to give the Manager more time for his views to play out in time. There was no mention of the B word but it is possible that they are also waiting for that to be resolved. In all, I felt the letter was quite forthcoming and helpful. As to what to do? I usually decide this sort of thing at the year end and will do so again this year. There is no pressing reason to sell; I hold primarily for income, and yet the capital performance has been poor, reflected in the discount. I feel that the Directors are onto it though and that gives me some comfort.

I have held this Trust for more than 20 years and am reluctant to sell, but I may do.

Dod

[Hariseldon58]

Thank you Dod for an informative reply.

There has been discussions that Mark Barnett had tended to follow Woodford with some notable failures.

The outlook does seem rather negative for the manager....

[Arborbridge]

This is a difficult - though not unusual! -dilemma in investment.
If you look at the top ten investments:-

Code: Select all

BP PLC                                | 6.9
British American Tobacco PLC          | 6.2
Legal & General Group PLC             | 4.2
Next PLC                              | 4.2
Royal Dutch Shell PLC Class A         | 4.1
Burford Capital Ltd                   | 3.7
Altria Group Inc                      | 3.4
Tesco PLC                             | 3.4
Roche Holding AG Dividend Right Cert. | 3.2
Novartis AG                           | 3.2


...and I am aware that's not the whole story, they are not a bad bunch, though not without obvious problems.
Many of us who own direct shares will have at least some of those in our portfolios.

When a fund of pretty solid companies goes through a bad patch it will either improve or get taken over/amalagamated into some other fund. One is unlikely to find a belly-up situation.
In the meantime, you can enjoy a 4.7% yield or even buy more and purchase companies at a 10% discount, or whatever it is. The rate of dividends increase I've received is 3.67% over five years, thus keeping up with RPI and the reserves are 1.6 years.

My instinct is to stay put for the moment - not to sell when the discount is high and my income keeps flowing satisfactorily.

Arb.

[Arborbridge]

Thank you Dod for an informative reply.

There has been discussions that Mark Barnett had tended to follow Woodford with some notable failures.

The outlook does seem rather negative for the manager....

But he's just avoided Woodford's notable failure! He's stuck to his knitting, not gone all wayward or fashionable. If it's a long distance race, we really have to go the distance before knowing the conclusion, and this is the gamble implicit in all investment.


Arb.

[scotia]

My instinct is to stay put for the moment - not to sell when the discount is high and my income keeps flowing satisfactorily.

Arb.

That's understandable. However - even allowing for the difficulty in achieving growth in a predominantly UK Income oriented fund, the past two years with EDIN have been poor, and the graph is pointed southwards. Hopefully Income/Value stocks will make a recovery.
However, if you do look for a change, while still remaining with UK equity income, then I personally prefer Troy Income & Growth Trust. True - the dividend yield is only 3.34%, but the Premium/Discount has only fluctuated by around plus or minus 2 over the past 5 years, and the 5 year total return has been 47.9% compared to EDIN 13.67%.
(And the Troy Trojan Income fund is currently providing a 4.11% Income with a 42% 5 year total return - and no worries about discounts.)
My spouse holds City of London - 4.44% dividend and a 5 year total return of 35.2%
As you are probably aware - there are lots to choose from, but I suspect If I were in your position I would be hoping for the discount to narrow before switching.

[Arborbridge]

My instinct is to stay put for the moment - not to sell when the discount is high and my income keeps flowing satisfactorily.

Arb.

That's understandable. However - even allowing for the difficulty in achieving growth in a predominantly UK Income oriented fund, the past two years with EDIN have been poor, and the graph is pointed southwards. Hopefully Income/Value stocks will make a recovery.
However, if you do look for a change, while still remaining with UK equity income, then I personally prefer Troy Income & Growth Trust. True - the dividend yield is only 3.34%, but the Premium/Discount has only fluctuated by around plus or minus 2 over the past 5 years, and the 5 year total return has been 47.9% compared to EDIN 13.67%.
(And the Troy Trojan Income fund is currently providing a 4.11% Income with a 42% 5 year total return - and no worries about discounts.)
My spouse holds City of London - 4.44% dividend and a 5 year total return of 35.2%
As you are probably aware - there are lots to choose from, but I suspect If I were in your position I would be hoping for the discount to narrow before switching.

Thanks. I do have an investments in Troy Trojan and also in CTY. My holding in CTY is one of my largest: higher than in EDIN.

Arb.